1. Field of the Invention
The subject invention relates to systems and methods for processing flexible spending account transactions, and more particularly, to an improved system and method for alleviating the need for the customer to provide an out-of-pocket payment at the time of sale and to later process a flexible spending account reimbursement for the patient responsible balance.
2. Background of the Related Art
A flexible spending account (hereinafter referred to as an “FSA”) is a pre-tax account used to reimburse qualified medical expenses or patient responsible balances (hereinafter referred to as “PRBs”) which would otherwise be paid directly by the plan participant. A FSA can be funded by an employer, employees or both. In the United States, the Internal Revenue Service (hereinafter “IRS”) Code determines the types of expenses which are reimbursable. For example, some reimbursable expenses are co-payments and deductibles for health care expenses, vision expenses, ambulance expenses, oxygen equipment, wheelchairs, prescription drugs, and the like. FSAs are sponsored by employers and typically administered by a third party administrator (hereinafter referred to as a “TPA” or “FSA administrator”). Large employers may sponsor and administer FSAs independently.
Typically, the employee, i.e. account holder, designates a portion of his or her compensation into an FSA on a tax-free basis. The employee receives desired goods and services of which the employee's health insurance may pay for a portion or all of the cost. Generally, in the case of pharmacy transactions, the determination of the amount the employee's health insurance will pay is made by a pharmacy benefits manager (hereinafter referred to as a “PBM”). Often, the employee is required to pay at least a percentage or flat fee, e.g., the PRB. If the out-of-pocket employee payment is a qualified expense under the IRS Code, the employee completes and submits a claim form to the FSA administrator. Upon approval and processing, the proper amount is deducted from the employee's FSA and a reimbursement check is sent to the employee.
FSAs provide benefits to employers and employees by saving both tax dollars. Employers save in FICA taxes and employees save state, local, federal and FICA tax. Further, employers increase employee morale and retention, enhance their status in recruiting and provide flexibility to their employees. Employees garner the advantages of budgeting for qualified expenses and directing how their FSA money is spent.
Techniques for automating the processing of financial transactions are ubiquitous. One example is illustrated in U.S. Pat. No. 6,208,973 to Boyer et al. which shows a point of service third party adjudicated payment system. The system is accessed by patients, i.e. cardholders, who utilize a plurality of providers, such as doctors, hospitals and pharmacies. Each provider has a point of service terminal associated therewith. The point of service terminals connect, via the Internet, with an Internet Merchant Bank, which maintains accounts for the cardholders. Third party payors employ the system to reduce administrative costs. The third party payor is typically an HMO who contracts with the cardholder's employer. An adjudication engine is directly connected to the Internet Merchant Bank. The adjudication engine pays the providers, bills the third party payor and bills the cardholder by utilizing a processor which interacts with a multitude of databases. In use, the provider sends information to the adjudication engine via the point of service terminal. The adjudication engine determines the obligations of the third party payor and the cardholder, and the Internet Merchant Bank pays the obligations and updates the balances accordingly in a real-time manner.
U.S. Pat. No. 5,644,778 to Burks et al. illustrates a medical transaction system which permits a plurality of healthcare provider computer stations to communicate with a plurality of payors and financial institutions. The medical transaction system facilitates processing medical claims. A financial transactor generates electronic finds transfers in order to credit and debit accounts. The financial transactor may also generate credit authorization to allow determining if a credit line is available to pay a remaining amount of a claim. If a credit line is available, the financial transactor generates a message to allow payment of the remainder. Additional references, such as U.S. Pat. No. 5,991,750 to Watson, show clearinghouse processing facilities for processing claims. Further examples are U.S. Pat. No. 6,067,522 to Warady et al. and U.S. Pat. No. 5,704,044 to Tarter et al. which show healthcare account and billing processing systems and methods. Each of the patents above are incorporated herein by reference to the extent they do not conflict with the subject disclosure.
In other prior art systems, PBMs retain credit or debit card numbers for customers on file in order to direct bill mail order pharmacy transactions. Accordingly, when adjudicating claims for mail order pharmacies, the PBMs may direct bill the customers' credit or debit cards for the PRB.
Various other systems have been developed that provide consumers with stored value cards that are intended to allow consumers to electronically debit their FSAs for the PRB, rather than pay the PRB at the time of a transaction and later seek reimbursement therefor. One of the difficulties encountered in these types of systems is that the information directly available in connection with stored value card transactions (such as the merchant category code and purchase amount) is insufficient to substantiate the expense under the IRS Code. For example, in a typical pharmacy there are thousands of products that may be purchased that are not reimbursable under the IRS Code. Thus, if a purchaser simultaneously purchases both reimbursable and non-reimbursable items, the information typically provided by a stored value card transaction (e.g., merchant category code and purchase amount) is insufficient to substantiate the expense.
Accordingly, there is a need for an improved system and method for processing FSA transactions which assures that only allowed expenses are reimbursed, alleviates onerous paperwork, enables customers to pay the PRB from their FSA without providing money at the time of purchase, and/or maintains accurate records for review by the employee, employer and FSA administrator.